What is a credit card?

Credit cards are plastic cards made up of a magnetic strip or a microchip and that constitute a form of financing that allows cardholders to pay for products or services without the need to have cash or checks. They can be issued by a bank or financial entity, a store or a service provider and have the ability to lend money to the holder in order for him to return said amount within 30 days without interest. If at the end of the stipulated month, the holder does not pay the loan, the card issuer could charge a high percentage of interest to the card user.

Unlike debit cards, a user can make payments or obtain money with a credit card without having to have funds in their checking account at the bank at the time of transactions. It is also important to note that there is a limit of creditwhich is specified in the card contract, although it may vary over time with the consent of both the issuing financial institution and the cardholder.

Two credit card payment methods are considered: the monthly payment for the entirety (that is, the payments made are paid every 30 days) and the deferred payment (or "flexible fee", in which the monthly amount is more reduced and allows the user to finance their purchases during the months agreed with the issuing entity). Finally, and to better understand this accounting concept, it is essential to know that a credit card should never be used to withdraw money from an ATM, unless a force majeure situation occurs.

Know all the information about Credit cards, the different types that exist their characteristics.

Leave a Comment